Bernstein Shur Business and Commercial Litigation Newsletter #68

Bernstein Shur Business and Commercial Litigation Newsletter #68

Daniel J. Murphy, Eben M. Albert, Kevin Decker, Paul McDonald

December 2016 | Issue 68

Our December recap highlights cases addressed to a dispute involving Google, Inc., a lawsuit suit targeting class action objectors, FINRA fines levied against Wells Fargo, and other news that will have an impact on business and litigation.

A class action has been commenced against Google, Inc. by employees alleging that its employment terms are unduly restrictive and violate various state laws.

The class action in part asserts claims challenging the terms of Confidentiality Agreements that employees are required to execute as a condition of employment. Plaintiffs assert that the agreements are unduly broad in scope, effectively barring employees from disclosing facts about the company to fellow employees. The lawsuit also takes aim at Google’s “Stopleaks” program, which requires employees to report unauthorized disclosures of Google’s confidential information as a condition of employment. Workers who fail to report such leaks can face termination or legal exposure based on breach of contract. Google, Inc. rejected the Plaintiffs’ assertions, noting that its practices were reasonable measures aimed at protecting its confidential business information. In recent years, confidentiality agreements and restrictive covenants in employment agreements have come under increased scrutiny before adjudicatory bodies, such as the National Labor Relations Board. This past year, companies such as T-Mobile and DirectTV have had to modify restrictive covenants in their employment agreements and policies.

Edelson P.C., a law firm that primarily represents class action plaintiffs, has filed suit against defense firms based on alleged racketeering and extortion for allegedly filing last-minute objections to hold up class action settlements. The complaint alleges that the defendants are “professional objectors” who seek significant payments in return for withdrawing or not appealing the denial of frivolous objections that would otherwise delay approval of the settlements. Proposed changes to Federal Rule of Civil Procedure 23, which governs class actions, are intended to curb this practice by requiring court approval of payments to objectors in connection with withdrawing or waiving objections.

FINRA has levied $14 million in fines against Wells Fargo and other financial institutions based on their flawed record-keeping procedures.

FINRA is the independent self-regulatory body authorized by the U.S. Congress to enforce governing standards in the broker-dealer industry. FINRA levied the fines against Wells Fargo and other firms based on their use of electronic record-keeping programs that allowed advisors to alter customer documents. The regulator determined that the firms did not create or maintain electronic records in a “write once, read many” format that would have prevented alteration of customer records after creation. The affected firms did not admit to any wrongdoing, but have accepted the fines imposed by FINRA.

The Fourth Circuit has rejected an NFL agent’s claims based on a business dispute addressed to lost clients.

In the underlying case, sports agent Carl Carey of Champion Pro Consulting Group, Inc. sued competitor Impact Sports Football LLC and two of its agents for luring away Carey’s client Robert Quinn shortly before Quinn signed a lucrative rookie contract with the St. Louis Rams. Carey claimed that the defendants engaged in unfair and deceptive trade practices under North Carolina law for allegedly using intermediaries, or “runners,” and a $100,000 marketing advance to induce Quinn to leave Carey’s agency for Impact Sports. Rejecting this claim, the Fourth Circuit acknowledged the “rough and tumble” and “competitive arena” of NFL recruiting. The court declined to classify the alleged conduct as an unfair and deceptive trade practice because doing so would upset the balance of incentives struck by the NFL Players Association’s internal regulations. This opinion serves as a reminder that industry norms and practices can determine whether an action constitutes an unfair and deceptive trade practice.